A three-digit number that indicates your creditworthiness is a credit score. When you apply for a loan or a credit card, it is the first thing that lenders check. It gives them the idea of whether or not the lent amount will be repaid on time. Hence, keeping a good credit score is important. By making all your payments on time, checking your credit reports regularly, paying off existing debt on your credit cards, and keeping your credit utilization below 30 percent, you can maintain your credit score.
HOW IS A CREDIT SCORE CALCULATED?
Every credit bureau has its own model for credit scoring that they use to calculate your credit score. Your score may be different, but the factors taken into account by each office are the same as:
- Payment History: 35%
- Credit Utilization: 30%
- Credit History Length: 15%
- Credit Mix: 10%
- New Credit: 10%
WHAT DOES YOUR CREDIT SCORE HELPS YOU TO KNOW?
A snapshot of your credit health is your loan score. Have a look at what allows you to know about your credit score:
- Helps you to know your current credit status: It lets you know where you stand and what you need to concentrate on when you review your credit score and study. A list of your current and past credit transactions is your credit report. Also, periodically reviewing your report allows you to find any inconsistencies that could have diminished your ranking.
- Helps you to get the best offers on loans and credit cards: Borrowers are also entitled to get the best rates on loans and credit cards with a decent credit score. You should hold a balance of 750 and above to obtain the best deals on credit items.
ADVANTAGE OF CREDIT SCORE
A good credit score means that you get a lot of benefits over someone with no credit score or a lower score. When you have a good credit score, you are entitled to the following benefits:
- Lower interest rates and better terms on credit products: One of the advantages of getting a good credit score is that banks at a lower interest rate can give you loans and credit cards. As well as a discount on the processing cost and eligibility to get a higher loan sum, you will also get other advantages.
- Improve your chances for credit card and loan approval: Borrowers with an excellent credit score are deemed to be low-risk, so the chances of acceptance for loans and credit cards are greater.
- Access to the best rewarding credit cards: You are also eligible for access to the most rewarding credit cards on the market with a good credit score, including those offering the lowest interest rates and the highest perks, such as cashback, travel points, and other benefits.
- Get approved for a higher credit limit on your credit card: You can also get approved for a higher credit limit on your credit card with a good credit score. Because of your demonstrated creditworthiness, creditors would possibly lend you more money.
- Eligible for a pre-approved loan offer: Borrowers with a decent credit score are also eligible for loan deals that are pre-approved.A pre-approved loan offer is usually offered by banks to current customers with a good credit history.
Therefore, if you want to reap all the above-mentioned advantages, maintaining a good credit score is important.